Canadian revenue body to redetermine matter involving tax installment payments
The Federal Court has found a Canada Revenue Agency (CRA) decision unreasonable because it lacked a factual foundation for a reason cited for its conclusion that the taxpayer failed to show she could not make timely quarterly tax installment payments.
In Minion v. Canada (Attorney General), 2025 FC 1461, the applicant was a US citizen who worked remotely for a US company. She resided in BC and paid Canadian income tax.
A CRA assessment required the applicant to make quarterly tax installment payments in 2021 and 2022 under the Income Tax Act, 1985 (ITA), because her net tax due for the three preceding tax years exceeded $3,000.
In 2021 and 2022, the applicant’s American employer withheld taxes from her salary and remitted them to governments in the US. In Canada, the applicant made no installment payments in the 2021 and 2022 tax years, alleging that she could not afford to do so.
The applicant paid $488.28 in installment interest for the 2021 tax year and $527.71 in installment interest and $302.66 in arrears interest for the 2022 tax year. She claimed foreign tax credits amounting to $16,030.26 for the 2021 tax year and $11,945.47 for the 2022 tax year.
The applicant requested relief for the interest on the unpaid installments and arrears accrued during the 2021 and 2022 tax years. CRA rejected her request, prompting her to seek a second review.
In March 2024, CRA also denied this request. CRA concluded that the applicant failed to show that she could not meet her obligation to make installment payments on time. CRA gave two reasons for reaching this conclusion.
First, CRA noted that the applicant withdrew financial hardship as a basis for relief. Second, CRA found that she could ask her US employer to reduce the amount withheld from her compensation.
The applicant applied for judicial review and asked the court to set aside the CRA’s second decision. She said the decision was unreasonable in line with Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 SCR 563. She added that the decision lacked a factual basis because the CRA’s second reason for denying her request was incorrect.
Decision unreasonable
The Federal Court of Canada granted the judicial review application, set aside the CRA’s second review decision, and ordered another reviewer to redetermine the applicant’s second review request and allow her to clarify and confirm the factual and legal grounds for the requested relief.
The court found that the respondent failed to point to any information in the certified tribunal record to support CRA’s second reason to deny the request.
The court noted that CRA, in its letter and the taxpayer relief fact sheet, cited this second reason as a key factor leading toward its outcome. The court added that CRA considered both reasons to determine that nothing prevented the applicant from timely making installment payments.
